Redundancy and the need to consult – a timely reminder

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Posted in:HR and Employment|October 25, 2013 | Join the mailing list

Relief greeted the announcement by Ineos last week that its operation at Grangemouth is not going to close after all and that hundreds of jobs have been saved thanks to a deal between the owners and the trade union, Unite.  However, the recession has seen
a number of high profile casualties, two of which (Ethel Austin and Woolworths) were the subject of Employment Tribunal claims on behalf of thousands of employees who were made redundant when those companies went into administration. The claims centred on
whether there should have been collective consultation with employee and trade union representatives before the redundancies went ahead.

In 2012, the Employment Tribunal decided that individuals employed at Ethel Austin and Woolworths stores with less than 20 employees were not entitled to collective consultation.   However, earlier this year (and as reported in

our article of 12 June 2013)
the Employment Appeals Tribunal (“EAT”) overturned that judgment, in a ruling which significantly changed the law in this area (at least for now).

European law requires an employer to consult with representatives of affected employees when it proposes to make 20 or more employees redundant within a period of 90 days or less.  In the UK, this European law was given effect by the Trade Union and Labour
Relations (Consolidation) Act 1992 (“TULRCA”) with an extra requirement: that there must be 20 or more redundancies taking place at one “establishment”.

The definition of an establishment was therefore crucial in determining whether or not collective consultation was required.  This is an important question for businesses since, on the one hand, collective consultation can be a major and expensive exercise,
but on the other, failure to comply if the collective consultation provisions “bite” can result in significant awards of compensation to employees.

Until earlier this year, the minimum period of collective consultation required was 30 days where 20 to 99 redundancies were proposed and 90 days where the number of redundancies was 100 or more. This longer period has recently been reduced by Parliament to
45 days, but if an employer fails to consult employee representatives where required (or fails to conduct genuine consultation), then it can be ordered to pay protective awards to the affected employees of up to 90 days’ gross pay per employee, irrespective
of whether the required consultation period was 30 days or 45.

Where an employer, such as Ethel Austin and Woolworths, employs people at multiple locations (for example individual stores), HR and legal professionals understood that each separate location was a different “establishment” for the purposes of TULRCA.  Therefore
where a store was closing, collective consultation was not required unless the closure was going to involve 20 or more employees at that store being made redundant.

However, in the Ethel Austin and Woolworths case, the EAT decided that TULRCA was incompatible with the requirements of European law and that therefore the words “at one establishment” contained in section 188(1) of TULRCA should be disregarded.

This now means that employers with employees at more than one site must check the position across their
whole organisation when considering making any redundancies (even where there are less than 20 redundancies proposed at one particular location). The test now is whether the employer is proposing to make 20 or more redundancies within a 90 day period
across its whole operation.   

But that’s not the end of the story.  Permission has now been granted for the Government to appeal the EAT’s ruling to the Court of Appeal, which could yet mean that the EAT’s judgment is overturned and the law returns to how it was before…. Be sure to watch
this space for further developments.

For more information about any of the above or for practical commercial advice on this or any other aspect of employment law, please contact
Nigel Crebbin of the Berg Employment Team on 0161 833 9211 or email him at

Follow us at Twitter: @Berg_HR

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.)

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